Shares of Asian telecom players have already priced in the impact of investments for setting up fifth generation (5G) mobile networks and potential monetization uncertainty, J P Morgan Securities analysts said on Monday.
The Asian telecom sector has underperformed the broader market by 18 percent in the past 12 months due to investor concerns stemming from uncertainties related to 5th Generation spending and potential monetization, JP Morgan analysts said.
They, however, believe it is now time to revisit the sector, with spectrum auctions due in Korea and Australia in 2018 and Japan and China in early 2019.
JP Morgan recommended investors buy telecom stocks in Japan, South Korea, China and Australia, saying these companies were unlikely to build significant standalone 5th Generationnetworks until a business case emerges.
However, their rivals in Hong Kong, Singapore and Taiwan face more competitive spectrum auctions, which are not expected until 2020, due to limited availability of 5th Generation bandwidth, the analysts said.
The incremental costs of investments in 5th Generationnetworks could be minimal as much of the improvements are currently being made under non-standalone (NSA) 5G networks, which build on the existing 4G infrastructure, JP Morgan wrote.
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Standalone 5G network is likely to require substantially more capex when compared to NSA 5G, it added.
JP Morgan prefers South Korea’s LG Uplus Corp and Japan’s Softbank Group Corp, both rated “overweight.”
It remains cautious on China Mobile Ltd, as it sees the company as most likely to build a wide coverage of standalone 5G networks.
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